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Cisco's Chambers preaches his Internet gospel

John Chambers has the world by the tail. He strides confidently up to thepodium at his company's annual North American NetWorkers conference - thisyear held in Vancouver, British Columbia - and smiles with satisfaction as he surveys the thousands eagerly awaiting his keynote speech.

John Chambers has the world by the tail. He strides confidently up to thepodium at his company's annual North American NetWorkers conference - thisyear held in Vancouver, British Columbia - and smiles with satisfaction as he surveys the thousandseagerly awaiting his keynote speech. But Chambers doesn't stay at the podium for long. Within minutes heis wandering all over the stage and through the audience, and gesticulating in an animated fashion aboutthe "Internet revolution."

This isn't any ordinary keynote speech and Chambers is no ordinary speaker. He is the CEO of acompany that, as of 14 July this year, had achieved a market capitalisation of no less than $210 billion.This has made Cisco one of the five largest players by market capitalisation on the NASDAQ exchange,and has allowed it to maintain a feverish pace of acquisition (40 companies in six years).

So when Chambers speaks, it doesn't sound like the 'vision' speech of the average computer industryman in a suit. This is the gospel of the future from one of the technology sector's most passionate andvibrant speakers. With his warm West Virginia drawl, a winning smile and almost religious fervor aboutthecontent of his message, it is easy to imagine John Chambers being as happy in a pulpit as in the CEO'schair.

John Chambers appears to like playing a role on the world stage. You can see that he enjoys talkingabout his conversations with US Vice-President Al Gore, leading Republican presidential candidateGeorge W. Bush, British Prime Minister Tony Blair and various other world leaders.

The Internet revolutionThis enjoyment appears to stem not from being 'star struck' or self-important, but more from a feeling ofdelight that world leaders are actually 'getting it' when he talks about the Internet revolution being just asimportant as the industrial revolution - and the consequences of being left behind just as dire.

"The Internet is the competitive advantage. Your competition will no longer be with Texas orCalifornia, it will be with the entire world," he says in explaining how the Internet will erode traditionalunderstandings of regional markets.

"It simply is the second industrial revolution. The first industrial revolution combined people andfactories and companies. The Internet revolution will combine people and information, and willdetermine which will grow and survive and which will get left behind."

It appears that no-one wants to get left behind, and they are all counting on Cisco to help make surethis doesn't happen. "We are enjoying the longest sustained growth we have ever seen without inflation,but the real driver here is survival," says Chambers. "It's amazing how, when leaders understand that thisis important to the success of their government or their country, they are willing to spend money on it."

And Chambers, of course, is no slouch at imparting that understanding along with lots of appropriateaphorisms and anecdotes. The man is an interviewer's dream: he speaks in quotes. People like him arethe real reason that journalistsstarted using tape recorders during interviews.

The A-TeamHe eloquently makes clear, for example, the synergy between Cisco and those 40 companies it hasacquired, but the pace of these deals would leave many others lost for words. But not John Chambers. Heenthusiastically explains why he is so busy acquiring what he considers key niche market players, andhow they fit into the "team" he has been building since taking over the CEO's job at Cisco.

"The first key is to realise what you are acquiring," he explains. "When large financial institutionscombine in different geographies, they are often looking for access to market areas, customer sets andmarket share. Our target is next generation products that the company can use to lead the market - and thepeople who can make that happen."

Mr. Chambers says that acquisition is not the first route into a market for Cisco, but is definitely akey tool for making an impact on many new, emerging and complementary products. "If you are not one ofthe first players to market - our rule of thumb is one of the first five - you will never become number oneor two," he suggests.

"Simple as it sounds, it's just a very disciplined approach to the market."

Mr. Chambers himself began his career with six years at IBM, after which he spent eight years atWang Laboratories. So when he landed at Cisco, his thoughts on acquisitions seem to have been wellformed.

In-house developmentHe re-iterates, however, that Cisco would rather develop new products in-house where possible. "About65 per cent of our products are internally developed and the other 35 per cent are from partnerships andacquisitions," he says. "That indicates a realisation by us that no-one can do it all by themselves."

There are, according to Mr. Chambers, five vital elements for him to look at in any acquisition. Hesays that both companies should have a common vision, there should be short-term and long-term 'wins'for both sides, the 'chemistry and cultures' of the two companies should match, and, if it's a largeacquisition, there should be close geographic proximity.

"You've got to remember that you are acquiring people," he says. "If you want to know how anacquisition really wins, you have to ask how many of the key engineers, managers and leaders are stillthere two years later. You'd be shocked - in many cases 40 to 50 per cent are gone. When you spend$500,000 to$700,000 per person to acquire a company - the 'per employee' cost of the acquisition - that's a disasterfor your shareholders."

He added: "Our average attrition is six per cent. When (Intel CEO) Andy Grove came and spoke toour senior management team about Intel's growth, he asked how many were there as a result ofpartnership or acquisition. More than 40 per cent of senior management raised their hands."

Leading by exampleIn any conversation with John Chambers, it would appear another unavoidable topic is team work -something he says he believes in so strongly that it permeates everything he does. When he plays tennis,it's only doubles. Golf holds little interest for him. "I'm a nut on teamwork," he says, adding thatleadership from the top is a key part of what makes teams work.

"I would never ask my team to do something I wouldn't be prepared to do myself. Leadership is a setof characteristics; it works like a dogsled team. But you must remember that the leader is the lead dog,not the person who is cracking the whip. You have to know when to push the team hard and haveconfidence in them."

Chambers is not only free with good quotes, but he doesn't stint on predictions, either. Within the nextfive years, he predicts that voice-based telephony will be virtually free so that charges for making anordinary phone call will be either non-existent or so small that they don't bear thinking about.

A globalised societyHe also predicts that "everything" will be connected so that any device you can possibly imagine beingadded to a network, including cars, appliances and vending machines, will be part of what can beaccessed over the Internet. Chambers further suggests that education will change forever and create alevel playing field for all companies and countries. It will also hasten "the death of time and distance" asemail, video conferencing and electronic collaboration over the Internet gain widespread acceptance. "Itwill lead to the globalisation of businesses and people," he says.

Probably the smartest thing that John Chambers says, however, is that he doesn't have all theanswers, and that Cisco itself could become an insignificant factor in the technology sector within twoyears if the company makes a wrong move, or moves too slowly. "In this revolution, the fast will beat theslow," he says, as he laces up his corporate running shoes and prepares to run off to the next interview.It's clear that when Chambers talks about the fast beating the slow, he has no intention of moving atanything less than jet speed.